Question

Question 2

Rudd Clothiers is a small company that manufactures tall-men’s suits. The company has used a standard cost accounting system. In May 2020, 10,100 suits were produced. The following standard and actual cost data applied to the month of May when normal capacity was 14,000 direct labor hours. All materials purchased were used.

Cost Element		Standard (per unit)		Actual
Direct materials		7 yards at $4.70 per yard		$322,200 for 71,600 yards ($4.50 per yard)
Direct labor		1.20 hours at $13.00 per hour		$173,166 for 13,020 hours ($13.30 per hour)
Overhead		1.20 hours at $6.40 per hour (fixed $3.90; variable $2.50)		$49,400 fixed overhead $37,500 variable overhead

Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $54,600, and budgeted variable overhead was $35,000.

(a)

Compute the total, price, and quantity variances for (1) materials and (2) labor. (Round per unit values to 2 decimal places, e.g. 52.75 and final answers to 0 decimal places, e.g. 52.)

(1)		Total materials variance		$		Neither favorable nor unfavorableFavorableUnfavorable
		Materials price variance		$		Neither favorable nor unfavorableFavorableUnfavorable
		Materials quantity variance		$		Neither favorable nor unfavorableFavorableUnfavorable
(2)		Total labor variance		$		FavorableNeither favorable nor unfavorableUnfavorable
		Labor price variance		$		FavorableNeither favorable nor unfavorableUnfavorable
		Labor quantity variance		$		FavorableUnfavorableNeither favorable nor unfavorable

(b)

Compute the total overhead variance.

Total overhead variance

$

Neither favorable nor unfavorableFavorableUnfavorable

Answer 1

Part (a) :

(1) Material Variances:

(i) Total materials variance

Total Materials variance = Standard cost - actual cost

Standard cost = 10100 suits * 7 yards * $4.70 per yard = $332290

Actual cost = $322200

Total Material Variance = $332290 - $322200 = $10090 Favorable

(ii) Material Price variance

Material Price variance = (Actual quantity * Standard Price) - (Actual quantity * actual price)

Actual Quantity = 71600 Yards

Standard Price = $4.70 per Yard

Material Price Variance = (71600 yards * $4.70 per yard) - (71600 Yards * $4.50 per Yard) = $14320 Favorable

(iii) Material Quantity variance

Material Quantity variance = (Standard quantity * Standard Price) - (Actual quantity * standard price)

Standard Quantity = 10100 suits * 7 yards = 70700 Yards

Actual Quantity = 71600 yards

Standard Price = $4.70 per Yard

Material Quantity Variance = (70700 yards * $4.70 per yard) - (71600 Yards * $4.70 per Yard) = $4230 Unfavorable

Part (a) :

(2) Labor Variances:

(i) Total Labor variance

Total Labor variance = Standard cost - actual cost

Standard cost = 1.20 hours * 10100 suits * $13 per hour = $157560

Actual cost = $173166

Total labor Variance = $157560 - $173166 = $15606 Unfavorable

(ii) Labor Price variance

Labor Price variance = (Actual Hours * Standard Rate) - (Actual Hours * actual rate)

Actual Hours = 13020 hours

Standard rate = $13 per hour

Labor Price Variance = (13020 hours * $13 per hour) - (13020 hours * $13.30 per hour) = $3906 Unfavorable

(iii) Labor Quantity variance

Labor Quantity variance = (Standard quantity * Standard Rate) - (Actual quantity * standard rate)

Standard Quantity = 10100 suits * 1.20 hours = 12120 Hours

Actual Quantity = 13020 hours

Standard Rate = $13 per hour

Labor Quantity Variance = (12120 hours * $13 per hour) - (13020 hours * $13 per hour) = $11700 Unfavorable

Part (b) :

Total overhead Variances:

Total Overhead variances = Standard cost - actual cost

Standard cost = 1.20 hours * 10100 suits * $6.40 per hour = $77568

Actual cost = $49400 + $37500 = $86900

Total Overhead Variance = $77568 - $86900 = $9332 Unfavorable

All the best...